Q3 2024 Green Plains Inc Earnings Call
At this time all participants are in a listen only mode. We will now turn the call over to your host Bill Bogs Executive Vice President Investor Relations and finance Mr. Box. Please go ahead.
Bill Bogs: Thank you and good morning, everyone. Welcome to Green Plains, Inc. Third quarter 2024 earnings call participants on today's call are Todd Becker, President and Chief Executive Officer, Jim Stark Chief Financial Officer, and several other members of Green Plains Senior leadership team.
Good morning, and welcome to the Green Plains, Inc. Third quarter 2024 earnings Conference call. Following the company's prepared remarks instructions will be provided for Q&A.
Bill Bogs: There's a slide presentation available and you can find it on our investor page under the events and presentations link on our website.
During this call we will be making forward looking statements, which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the risk factors section of our Form 10-K Form 10-Q, and other reports and filings with the Securities and Exchange Commission, we do not undertake any duty to update any forward looking statements now I'd like to turn the call over to Todd Becker, Yes. Thanks, Phil.
Good morning, and thanks for joining our call today, we reported $83 3 million in EBITDA for the third quarter inclusive of a $37 million gain.
Bill Bogs: Gain on the sale of the Birmingham unit train terminal our EBITDA from normal operations was $53 million in our stand alone consolidated crush margin was $58 million.
Bill Bogs: Before I get to deepen the numbers I'm sure you saw the announcement this morning regarding Jim Stark retiring from Green Plains, and the promotion of fill bogs Chief Financial Officer.
These two guys are really well known to all of you, which should make for a seamless transition with Jim returned to Green Plains have subsequently named CFO I always knew this day would come as his goal is to get back to Nebraska and spend more time with his grandkids one of the things that was part of the succession planning was set fill up for success and Jim lived up to hinder his under the bargain and more Jim and I spent.
Any years together at Green Plains, and he is one of the many who will have made a longstanding impact on the company and I am proud to have worked with them I'll, let Jim tell you a bit more but it will be exiting the public company world to focus on the next stage of his career with smaller private companies and spend more time with his family. Thanks again, Jim for your dedication loyalty, so let's get back to the quarter or.
Our ethanol operating rate reached nearly 97% and we also delivered a record quarter of ultra high protein production as well as maintaining a strong corn oil yield in line with our record rates achieved in the second quarter. Our operating results are demonstrating to successive years of planning and execution to deliver improved operational performance.
Bill Bogs: Across our platform and we believe we have room to continue improving on these operating rates.
Mid to high <unk> run rate should be the new normal for our platform as we still have some more improvements under way to get there and are finishing up some of those in the fourth quarter as well.
Earlier this month, we completed an extended shutdown at our Mount Vernon location as we indicated earlier location performing some of that needed maintenance to bring the plant back to its full run rate capabilities.
We are now beginning to scale up production and expect to reap the reward of additional capacity in the next couple of weeks.
We are in the process of upgrading our buying in the next coming months and anticipate that plant being able to increase its efficiency and production as well over the next several quarters. The operations team have done a fantastic job safely maximizing the platform.
And we continue to find new opportunities to increase throughput and improve production metrics.
Margins were solid during the quarter as we indicated on the prior call driven by demand of continued strong exports and favorable natural gas in corn prices, even though we did see some rapid compression related until late into the quarter.
Bill Bogs: We continued to experience tailwind for ethanol exports with totals through August of $1 2 billion gallons and on pace for a record year of one eight to $1 9 billion gallons as other companies ramp up other countries.
To wrap up their blend mandates and low carbon programs. We believe this will continue to grow led by Canada, where they are rapidly expanding blends and represent over one third of where all of our exports scope.
Overall, we significantly outperformed the prior quarter and were up prior year as well.
We will cover protein carbon cornrow on this call as well, but I'd be remiss not to start with clean sugar, while it may have taken longer than we all wanted the ongoing startup and commissioning of our CST project in Shenandoah was a key focus during the quarter as we had indicated earlier. This week, we have worked through some of the most of the challenges in.
Bill Bogs: And we have begun to supply product to customers for validation.
Bill Bogs: I believe we will be executing our first book commercial sales and shipping low Ci dextrose to customers during the fourth quarter. The production process will continue to be debottleneck ramping up over the coming year and interest remains very strong despite the delays having up to a 40% carbon intensity advantage. It's worth the wait for many of these customers as we always said this technique.
Bill Bogs: <unk> developed by fluid quip is massively disruptive to an industry supply oligopoly that has existed for decades and no. One thought we could make clear clean low carbon dextrose, but here. We are there was a herculean effort across green plains and fluid quip to get to this point, we still have plenty to do to scale from here, but this is one of the many steps to realizing the true value of this technology outspend.
More time on this later in the call.
Bill Bogs: During the quarter, we completed the sale of the Birmingham unit train terminal and use the proceeds to retire the remaining high price debt related to Green Plains partners. This was an important step enabling the additional simplification and efficiency gains anticipated. When we first began the process of acquiring Green Plains partners Board of directors continues to progress the strategic review process.
Working with its financial advisors, BMO and most as outlined in the press release and now I'll hand, the call over to Jim to provide an update on the overall financial results I'll come back on the call to provide an updated policy outlook and discuss our progress on all of our initiatives in more detail Jim.
Thank you Todd and good morning, everyone.
Jim Stark: Green Plains consolidated revenues for the third quarter were $658 7 million.
$234 million or approximately 26% lower than the same period a year ago.
Jim Stark: As it has been in the last couple of quarters. So lower revenue is attributable to lower prices experienced for ethanol dry distillers grains and renewable Cornwall in the third quarter of 24 as compared to the same period a year ago.
As Todd mentioned, we also saw a drop in our commodity inputs with corn natural gas gas down significantly year over year, resulting in a stronger margin opportunity in the quarter compared to the prior quarter and prior year.
Jim Stark: Our plant utilization rate was 97% during the quarter compared to 94% run rate in the same period last year.
A year ago quarter of 2023 included production gallons from the Atkinson plant that was sold in third quarter of last year to utilization actually increased despite production gallons declining slightly year over year.
The trailing four quarters, we have averaged a 94% utilization rate and we anticipate our plants to continue to perform in that mid 90% range of our stated capacity for the fourth quarter barring any events outside of our control.
For the quarter, we reported net income attributable to Green plains at $48 2 million.
Jim Stark: Or <unk> 69 per diluted share that compares to a net income of $22 3 million or <unk> 35 per diluted share for the same period in 2023.
I wanted to point out that the diluted share count for the third quarter for both the current and prior year third quarters included the dilutive effect of the 2027 converts due to the accounting treatment of the as if converted method. So long as the effect would not be dilutive anti dilutive for which it was not.
Jim Stark: EBITDA for the quarter was $83 $3 million inclusive of that $37 million gain on the sale of Birmingham unit train terminal compared to $52 million in the prior year period.
Like for like adjusted EBITDA for Q3 of 24 was $53 3 million compared to $42 9 million for Q3 at 23, when you adjust out onetime items for both periods.
Depreciation and amortization expense was off was higher by $2 2 million versus a year ago at $26 1 million. This includes a one time $3 5 million impairment charge related to R&D intangible assets that were taken in Q3.
Speaker Change: Include the dilutive effect of the 2027 converts due to the accounting treatment of the as if converted method. So long as the effect would not be dilutive anti dilutive for which it was not.
Speaker Change: EBITDA for the quarter was $83 $3 million inclusive of that $30 7 million gain on the sale of Birmingham unit train terminal compared to $52 million in the prior year period.
We realized $58 $3 million in consolidated crush for the quarter and that compares to $52 nine for the prior year of 2023.
Jim Stark: Also in the third quarter, our SG&A cost for all segments was $26 7 million, that's $8 6 million lower than the prior year due to lower personnel costs and adjustments to incentive accruals.
Speaker Change: Like for like adjusted EBITDA for Q3 of 24 was $53 3 million compared to $42 9 million for Q3 of 23, when you adjust out onetime items for both periods.
Interest expense of $10 1 million for the quarter, which includes the impact of debt amortization of capitalized interest was $5 million higher than the prior year's third quarter.
Speaker Change: Depreciation and amortization expense was <unk> was higher by $2 2 million versus a year ago at $26 1 million. This includes a onetime $3 5 million impairment charge related to R&D intangible assets that were taken in Q3.
This increase was primarily due to loan fees associated with the pay off the Green Plains partners debt retired in the third quarter of 2024.
Speaker Change: We realized $58 3 million in consolidated crush for the quarter and that compares to $52 nine for the prior year of 2023.
Jim Stark: Income tax for the quarter was a benefit of $8 million compared to a tax benefit of seven eight for the same period in 2023.
Speaker Change: Also in the third quarter, our SG&A cost for all segments was $26 $7 million, that's $8 6 million lower than the prior year due to lower personnel costs and adjustments to incentive accruals.
At the end of the quarter the federal net loss carry forwards available to the company was $10 8 million.
Jim Stark: Which may be carried forward indefinitely. The Nols were down significantly from our Q2 2024 <unk> were used to offset the gain on the sale of the Birmingham unit train terminal and the profitability we had within the quarter.
Speaker Change: Interest expense of $10 1 million for the quarter, which includes the impact of debt amortization capitalized interest was $5 million higher than the prior year's third quarter.
Our normalized tax rate for the quarter was around 25%.
Speaker Change: This increase was primarily due to loan fees associated with the pay off the Green Plains partners debt retired in the third quarter of 2024.
Jim Stark: Our liquidity position at the end of the quarter improved from the prior quarter due to strong results from operations our.
Jim Stark: Our liquidity included $252 million in cash cash equivalents and restricted cash along with approximately $228 5 million available under our working capital revolver.
For the third quarter, we allocated $28 million of capital across the platform, including $9 million to our clean sugar initiative about 8 million to other growth initiatives and approximately $11 million towards maintenance safety and regulatory capital.
Jim Stark: On a year to date basis, we incurred capital expenditures of about $67 8 million and we anticipate capex for the total year 24 will be in that range of about $90 million to $100 million.
Again as a reminder, this range excludes approximately $110 million and carbon capture equipment needed for our Nebraska initiatives as we have financing lined up to cover those needs.
Jim Stark: In closing.
Speaker Change: My time with Green Plains has been immensely rewarding I'm grateful for the opportunities I've been given to grow professionally personally during my 14 years here I cannot think Todd and the board enough for allowing me to rejoin Green plains at the executive level at the beginning of 2022 to be closer to my family and Grandkids.
I have complete confidence that fill Bob's will excel in his well deserved new position as CFO in the finance and accounting team will continue to support him and the management team as the company moves forward.
I look forward to my next chapter and I appreciate knowing and working with all of you on this call over the last six nearly 16 years in my public company career in the renewable fuels industry.
Now I will turn the call back over to Todd Thanks, Jim and again, Thank you and good luck in the future.
So, let's talk carbon our advantaged, Nebraska strategy to Decarbonize, our 287 million gallon footprint in the state remains on track.
And along with our pipeline partners. We have made great progress again this quarter of note, Wyoming, which is one of three states with primacy for issuing classics permits.
Approved the first sequestration well for the trail Blazer project in September and we expect additional well approvals for the project to follow in the coming months.
The long lead time carbon compression equipment has been ordered and is on schedule for delivery in Q2 of 2025, and we expect to begin construction on these facilities in the next month or so.
<unk> is on track for the second half of 2025 operations and cash flows. This is another game changing and differentiate <unk> project for Green Plains shareholders that we will be one of the earliest and largest platform sequestering carbon.
Our carbon earning estimates remain intact with the expectation, we will generate $130 million or so per year, starting in the second half of 2025, assuming 40 fives, the values and the $70 ton carbon credit or L. CFS credit even after discounting the value of the tax credits.
Nebraska has an asset alone with this type of base earnings is not at all reflected in our share price of our company in my opinion and our opinion as well during the quarter. We saw a decarbonize ethanol production facility exchange hands for the price over $3 per gallon. So you can do the math the value of our 287 million gallons in Nebraska would be higher than our current market.
Jim Stark: Those plants alone.
While the summit carbon pollution projects continues to make progress with permitting and right away. We anticipate the Nebraska pipeline will be on prior to that given some of the largest volumes of low Ci ethanol gallons during the existing 45 Z runway of 2025 to 2027.
The 12 year 45, Q credit available if it has not extended what some misunderstand is that 12 year credit is from the date when the facility is placed in service not from when the IRA was enacted and I think that's a really important point when we look at the availability of our long term cash flows.
Do believe that 45 Z will be extended beyond 2027, when the new Congress considers a broader tax package next year.
Jim Stark: <unk>, thus far this election plays out there is bipartisan support for this measure.
And support across a diverse set of industries, but we will still waiting for a proposed regulations to come out.
Speaker Change: Now onto distillers corn oil we are seeing some stabilization in oil prices as the market has tightened up as evidenced by the ryzen palm and soy oil prices during the quarter. We look forward to 2025, as we know desio becomes an advantaged feedstock and we continue to push record yields as a platform with more to come in the future when you add corn oil and carbon.
Those two account for over $220 million of combined EBITDA contribution beginning in the last half of 2025.
And protein as noted on the top of the call. We had record production of ultra high protein during the acute during Q3 and a green plains plant and we will continue to grow from there in the future our commercial and operations team have continued to execute and improve our processes to maximize the flexibility and efficiency at each of those locations are Saracen JV also ramped.
Production during the quarter and continues to get to Max run rates <unk>.
Actually we continue to open up new markets and win new customers for our 50 pro Ultra high protein product both in the U S and internationally, we now shifting many Asian destinations and started commercial shipments to our strategic customers in Latin America with.
With JV production. We now also have a better access to customers in the Western U S opening another new market for us from a transportation standpoint, the team is making great progress increasing our sales to our pet and optical so agriculture customers.
Operationally, we've been improving margins are somewhat lower than expected due to the availability of cheap competing products. We believe this will work out self out in due time and continue to believe that adding optionality and flexibility to our bio refinery platform to maximize what can be achieved with a kernel of corn positions us for long term success.
For our 60 pro sequence product, we have we have been making additional upgrades to our prediction capabilities and continuing to refine and improve our product our upgrade at wood River is expected to be online in the first quarter next year to allow that plan to better and more efficiently and cheaply cheaper produce more sequence.
More important we just completed a new run at Central City, and we were up to spec of sequence in less than six hours with little disruption to daily operations as we continue to ship and sell sequence to customers there.
There's a lot of interest in disagree, but we are limiting volumes until we finish these upgrades during the first quarter of 2025. We also have some really exciting potential process breakthroughs for 60 pro on deck for early next year, So stay tuned.
Lastly, we will wait and see how the margin structure shakes out this quarter once the corn crop is fully harvested. The forward look on ethanol margins is a bit of an unknown as usual, but we know export and demand overall does not support this margin structure tone as evidenced by yesterday's EIA reports showing stocks now under 20 days of production and the crush yesterday finally improve.
Speaker Change: <unk> <unk> per gallon on this news if you compare year over year at this time last year relative to much similar numbers margins were significantly higher and hopefully yesterday began the march to start to match some of those numbers, but we are a little bit of ways to go.
Speaker Change: With regard to sugar are outstanding operational and engineering teams worked tirelessly to prove out this groundbreaking technology at commercial scale and we have been consistently producing at the facility with product already sent to key customers for formulation testing we.
Speaker Change: The forward looking ethanol margins is a bit of an unknown as usual, but we know export and demand overall does not support this margin structure tone as evidenced by yesterday's EIA reports showing stocks now under 20 days of production and the crush yesterday finally, improving <unk> per gallon on this news if you compare year over year at this.
We will continue to work over the coming quarters to optimize the Shenandoah facility to increase production volumes, including addressing additional bottlenecks learnings from our York Innovation Center pilot and now building and operating this commercial scale facility in Shenandoah puts us in a much better place for when we decided to execute on serial number to it.
Speaker Change: Last year relative to much similar numbers margins were significantly higher and hopefully yesterday began the march to start to match some of those numbers, but we have a little bit of ways to go with.
Critical piece here is that what we have proven.
Speaker Change: With regard to sugar are outstanding operational and engineering teams worked tirelessly to prove out this groundbreaking technology at commercial scale and we have been consistently producing at the facility with product already sent to key customers for formulation testing we.
What we've proven is the technology at scale and now it's a matter of building out that infrastructure and reshaping an industry that has never been disrupted.
Our Q3 performance demonstrated the capabilities of our platform a strong run rates and yields, allowing us to capture the positive margin environment. We.
Speaker Change: We will continue to work over the coming quarters to optimize the Shenandoah facility to increase production volumes, including addressing additional bottlenecks learnings from our York Innovation Center pilot and now building and operating this commercial scale facility in Shenandoah puts us in a much better place for when we decided to execute on serial number to it.
Intend to keep checking off milestones of our de carbonization strategy and.
As we wrap up the Queen sugar technology to improve shareholder value. Thanks for joining the call today, but we can start the Q&A session.
At this time, if you would like to ask a question press star followed by the number one on your telephone keypad.
Critical piece here is that what we have proven.
What we've proven is the technology at scale and now it's a matter of building out that infrastructure and reshaping an industry that has never been disrupted.
If your question has been answered and you would like to remove yourself from the queue Chris.
Star One again, we'll pause for just a moment to compile the Q&A roster.
Speaker Change: Our Q3 performance demonstrated the capabilities of our platform a strong run rates and yields, allowing us to capture the positive margin environment, we intend to keep checking off milestones of our de carbonization strategy and as we ramp up the clean sugar technology to improve shareholder value. Thanks for joining the call today, but we can start the Q&A session.
Your first question comes from the line of Jordan Levy with <unk> Securities.
Speaker Change: Okay.
Good morning, all and Jim. Thank you for everything and best of luck in the next downturn, Phil Congratulations on the new role.
Speaker Change: At this time, if you would like to ask a question press star followed by the number one on your telephone keypad.
Jordan Levy: Todd you mentioned it on the call, but your equity value here is certainly not reflecting the value of advantaged, Nebraska on the Ccs side and maybe even more so the other initiatives in protein and sugar can you can you just talk to outside of the strategic review process. You have what you think the market needs.
If your question has been answered and you would like to remove yourself from the queue.
Press Star one again.
I see from you all to get more value reflected there on what the work you guys are doing.
No I think that obviously the milestones there's a couple of big events, the milestones and carbon are going to be really critical and we should be able to break ground here in the next 30 to 45 days on that project and I think once we do that youre going to start to see a quick ramp up.
Jordan Levy: In the interest and the credits that we are going to produce both.
Jordan Levy: About 45, Z and and voluntary and ore.
L CFS credits for California.
Speaker Change: I think it's really important is that those are programs that are in place and I think that once that starts to kick off just from that alone the value of our company will begin to to adjust higher dip.
That sooner than that and obviously, we've gone through some ups and downs as an industry I think broadly as an industry as well, whether it's going to be in.
AG or renewable fuels and ethanol or anything in between we've seen compressions across the board and overall values as an industry.
I think a little bit that is overblown, especially with the value of our asset base. If you look at our per gallon value of our asset base today, It's just significantly too low, but we have we've had a few challenging quarters and I think what we were able to show this quarter and a normal margin environment. We can certainly deliver free cash flows I think when we look at things like sugar that was delayed it's not going to be in.
<unk> impact to earnings, but what it is we believe and we've always has always have believed is that our CST technology developed at fluid quip.
And now producing at Green Plains is a game changer, but it's a longer term process that will take place where we have significant interest in those products. So I think just overall.
It's a little bit of everything we've had we've had ups and downs of the company and I think the margin environment continues to be very very volatile in this industry.
And we just got to watch that closely but.
Speaker Change: Our financial position remains strong our per gallon just just generally on a generic per gallon valuation is too low relative to replacement and relative to other <unk>.
Speaker Change: Other transactions and I think just overall, it's just a step process to get ourselves revalued back into where we need to be.
I appreciate that and then maybe just kind of building on the CSP side that you mentioned I don't think its quite as well have been understood markets certainly as ethanol even as much as protein, but maybe just help differentiate the about the long term value you see from that business.
Some of the more near term challenges, we've seen in protein and maybe just give a little more detail on how you view the sugar dextrose market evolving.
Yes that market and demand remains strong for four dextrose overall, but even more so for low carbon dextrose.
Speaker Change: As CPG companies continuing to remain focused on lowering the carbon score of their products and that's where we see interest everything from.
Speaker Change: Pancakes, Eric Sara to industrial chemicals, and everything in between and I think that's a misunderstanding that thats a lot of that happens at permutation or sweeteners are used in many other areas and that's really what we're producing.
We have started to receive our certifications and now that we are producing product.
Our goal now is to get our food grade certification. So we can begin to sell.
Into the consumer markets as well and I think Thats just the first step of many steps that we want to do to monetize this product the margins remained strong.
You make dextrose instead of alcohol your margin is significantly higher and I think thats still proven by our results that you see from the others in the space that make that make dextrose and wet mills those margins continue to remain strong, especially on that product. So.
We have an interesting technology, we have interest in the technology from Google from around the World right now from <unk> Quip continues to get calls and in the work that they've done and what we are proving out and in the United States, where we're going to we're really going to focus our efforts is that there is significant demand people have waited for us.
Speaker Change: And it's from food all the way through chemicals, and I think youll start to see us deliver on some some commercial volumes to customers and also some off takes as well during the kind of next.
30 to 90 days. So we're really excited about that the team has worked really hard but the margins have have maintained themselves.
Throughout this whole process and have not compressed relative to everything else that we've seen in <unk>.
Speaker Change: Really excited about it it's a long game on this one but owning and controlling this IP in this technology.
Improving at commercial scale that we can make.
Low carbon dextrose and sweeteners never.
Never been done before in the history of agriculture at this type of scale in this type of level, where you can take a dry grain facility and make dextrose can be used in food and industrial products, that's really exciting.
Speaker Change: Great Testament to our team.
Speaker Change: Your next question is from the line of Laurence Alexander with Jefferies.
Hey, Good morning, this is Kevin Estok on for Laurence.
Kevin Estok: Two questions one on the Queen sugar and one on ethanol margins I guess.
Kevin Estok: I know that you said that margins don't fully reflect current conditions and I guess, just given the direction that I think.
Prices have moved in last several weeks and months I mean could you proceed producers, possibly lowering rates like timber production just.
Just sort of list pricing.
Just curious how your outlook has changed for <unk>.
Margin outlook prices since the last earnings and I guess I think you said last call that the corn basis, what's coming down in Q3, just did that play out as expected.
Speaker Change: Okay.
Yes. This is a little bit of a wait and see on margins. This quarter I think what we saw was.
A compression late in the quarter you all saw that you've all talked about that late in the third quarter and it continued.
Into into October, but I think as we leave October in these numbers that we saw yesterday to prove that what we produce is being absorbed withdraws at a 10 80 was 10 80 run rate yesterday.
And I think the market is going to have to adjust to that I think we were dragged down.
Speaker Change: This weakness in oil and gasoline prices that we saw in the quarter in ethanol ethanol took the hit as well.
But overall I think hopefully we're going to we're bottoming out here and we saw again, we saw some some increase yesterday and we'd like to see that see that continue and see what happens over the next coming weeks, but we always still have turnarounds in the industry.
And we still have some other areas, where I think we're going to take some stuff off line naturally.
Speaker Change: I don't know yet today that we're at a point, where anybody is going to significantly reduce production and as we go into next year. If we can maintain these stocks and get out.
Get through the first quarter and get into driving season again, I think that'll be a very positive for for next year margins than.
Speaker Change: Weakness in oil and gasoline prices that we saw in the quarter in ethanol ethanol took the hit as well.
And we do believe exports will remain strong through the rest of the year.
Speaker Change: But overall I think hopefully we're going to we're bottoming out here and we saw again, we saw some some increase yesterday and we'd like to see that to see that continue and see what happens over the next coming weeks, but we still have turnarounds in the industry.
And hit those numbers so.
Speaker Change: Speaking, we're using what we what we're producing.
But it would be nice if we can get even a larger drop but with with.
Speaker Change: David demand less in 'twenty, typically we see expansion back into normal margin structures.
And we still have some other areas, where I think we're going to take some stuff off line naturally.
Speaker Change: On a core basis.
We've definitely come out of harvest firmer than.
I don't know yet today that we're at a point, where anybody is going to significantly reduce production.
Speaker Change: And I think.
And as we go into next year, if we can maintain these stocks and get out.
Anybody really thought the farmers are able to put some of this way, but we are the core basis Q3 was at least 50.
Speaker Change: Get through the first quarter and get into driving season again, I think that'll be a very positive for for next year margins than.
Bushel better than the prior three years, so we saw that market.
And we do believe exports will remain strong through the rest of the year.
Come down, which obviously helped the margin structure, where everybody in the industry, including ourselves and as we come out of as we come out of harvest.
Speaker Change: Hit those numbers, so, but generally speaking we're using what we what we're producing.
But it would be nice if we can get even a larger drop but with with.
Speaker Change: Basis is still <unk>.
Speaker Change: Lower in areas and then traditional last couple of years, but it's definitely firmer than than we thought but we're not having any trouble buying corn. It's just a matter of as these flat prices with futures pushing towards $4. The basis is going to remain firm I think throughout the year.
David demand less in 'twenty, typically we see expansion back into normal margin structures.
On the corn basis, we've definitely come out of harvest firmer than.
Speaker Change: Then I think.
Anybody really thought the farmers are able to put some of this way, but we are the core basis Q3 was at least 50.
Speaker Change: Understood. Thank you and I, just don't clean sugar.
Bushel better than the prior three years, so we saw that market.
As you know certainly this week the first commercial sale Queen Sugar Tech deployments Endo examples going to customers I'm just curious what your feedback has been from those customers I mean, whether or not you've received feedback on the samples.
Come down, which obviously helped the margin structure, where everybody in the industry, including ourselves and as we come out of as we come out of harvest.
Speaker Change: Basis is still.
I guess just curious about the Jack.
Speaker Change: Lower in areas than than traditional last couple of years, but it's definitely firmer than we thought but we are not having any trouble buying corn, it's just a matter of.
Geographic makeup I mean, most of the North American customers are.
Speaker Change: Yes.
Tony I will help be helpful. Thank you.
I'll answer your last question first there all north American customers today, it's really where sugar is going to our deck doses going to travel.
These flat prices with futures pushing towards $4. The basis is going to remain firm I think throughout the year.
While we are seeing global demand for the technology from customers I want to talk to fluid quip about bringing their technology to other countries and again, we're not we're not opposed to that and I think it's going to be a very big value creator for them and for Green Plains as well.
Speaker Change: Okay.
Speaker Change: Understood. Thank you and I just want clean sugar.
As you know starting this week.
Speaker Change: First.
Speaker Change: So clean sugar.
I mentioned <unk> had samples go into customers just curious what your feedback has been from those customers I mean, whether or not you've received feedback on the samples and I guess just curious about that.
Relative to customer feedback, what they've seen product already out of our York Innovation Center that is structurally similar to what.
Speaker Change: We're going to we are producing in Shenandoah and the product will have in Shenandoah will be even better so.
Speaker Change: Geographic makeup I mean, most of the North American customers are.
Speaker Change: Yes.
For us it's really a matter of time now you have to make product before you can get food grade certification started the process and that's where we're at today is going to start that process, but you saw we had GMP approvals. We got other approvals pending I think youll start to see that our product will become a very well accepted product. Our first goal is to ship our products into the industrial markets today because it.
Speaker Change: Theyre not food grade.
Our markets, although they do need some of their own certifications and early feedback and stuff that we have shared has been good but again, we're just starting to ship. It out now so it's going to take a little bit of time. This was this is a long game, but owning and controlling this IP and this technology that is such a disruption in game changing and we've proven now that is that it works.
Speaker Change: Works at scale or there's still some things we're going to have to continue to work through in Shenandoah, but as we think about number two it will be better better engineered and better better constructed in terms of cost and cost per pound and cost per ton and those type of things.
I think we're on our or just its just a long path, but this is absolutely a disruptive technology that is never this has never been done before history, and and and we're very proud of the team that has done it.
Speaker Change: Thanks.
Your next question is from the line of <unk> Jain with UBS.
Hey, guys congrats on the quarter.
We're a little color on how the partnership with shallow.
Speaker Change: If there's any update.
Speaker Change: File churn as well.
Speaker Change: Okay.
Speaker Change: Yes ill, let Leslie a comment on our SPT partnership there's some exciting things going on there Leslie you want to comment on that to start.
Leslie: Sure. So the process is successfully started up in New York and the first Cellulosic ethanol has been produced.
<unk> will now switch to really a one of a kind opportunity the desio or what we call. The second Gen Desio.
Speaker Change: As the next in line to line out so thats basically the previously unattainable corn oil and then the last piece is going to be the alignment of protein once that all is up and running then.
Process, we'll switch to campaign mode, and that's when we'll be producing more products for validation efforts on the protein side.
Speaker Change: Thanks, Leslie and then also then.
Speaker Change: What was the second question that you had.
Speaker Change: Any update on Japan, Yes, there are some startup.
It took a little bit longer than we wanted construction took a little bit longer and we continue to debottleneck. Therefore, we're starting to push towards the upper end of the rates that are available production capacity there.
Speaker Change: Bring it on that much protein on the market, we had a wafer customer approvals, but the quality of the protein is excellent the toxin levels at <unk> are the lowest in the country, which is nice because there are certainly customers that wanted north Dakota product because of the absolute zero toxin in corn that is there and so thats getting opening up new markets.
As well as the West Coast, where we really did not have a freight advantage out of our terminals are out of our facilities to get to the west coast, We're seeing some new demand out of there as well.
Speaker Change: Again these are.
These are long games, but I think as we go to Max production over the next several quarters. We're just excited about the fact that we have a really great product and as sequence starts to kick in in 2025. So.
More on that next quarter.
Speaker Change: Guangdong.
Speaker Change: Okay.
Your next question is from the line of Andrew <unk> from BMO capital markets.
Hi, guys. This is actually Ben on for Andrew.
Ben: Just wanted to say, congratulations jenn and to fill as well.
Wish you all the best of locked there.
So my question has to do with carbon capture.
Ben: Can you just walk through the key milestone that we should be tracking in order to hit the second half 'twenty $570 a credit.
Speaker Change: Target.
Speaker Change: Okay.
Speaker Change: So what we're watching very closely obviously as the lead time our equipment order.
That is all.
Speaker Change: On track and we've been talking to the manufacturer and they believe they are on track for our second quarter delivery, we expect to break ground on the on the structure in the next several weeks or less than a month from now and that will really be the first milestone I think that will be important to everybody.
Most of the engineering has been done already we have we have the credits or the permits to operate.
And all of the accounting and all of the counties counties, where we are located Nebraska is very different.
And then other states relative to carbon capture and approvals and permits and so very supportive from the state.
So we will wait to see when trailblazer starts to build their laterals as well and so we'll know at that point I think we'll watch that closely we.
We do have some air permits just to start to construction and start construction, which we expect to receive shortly.
Speaker Change: Those are just <unk>.
Permits from the state as we as we.
Speaker Change: Ed.
Speaker Change: Receive an every other construction projects that we do and it doesn't seem to be any delays are receiving those relative to the start of construction.
So that's really up to our partner to make sure. The pipeline is in service and laterals are built in.
And the continuation of classics wells in Wyoming. All of this has been laid out in the past and I think each of those are going to be really important I think what also as important as the rules on 45 Z as they rollout early next year sometime.
And we believe those will be positive relative to what we've seen in the past.
I would expect certainly by the third quarter of next year to have those full rules outlined by the time, we're sequestering carbon.
So we can earn the 40 fives of the tax credit and then on top of that.
The voluntary credits or the <unk> credit. So it's just a step by step process, but at this point.
Speaker Change: The equipment is ordered equipment is in.
Speaker Change: In construction and in manufacturer. So this is we're on path to.
Somewhere in that third quarter begin to compress carbon and when we turn it on and we're basically turning out at full rate.
We have no reason to believe that our partner won't be operational as well. So I mean, I think that when you look at that.
And the interest that we have not only.
Speaker Change: <unk>.
Speaker Change: Low carb low carbon ethanol, which I think Pete you don't underestimate the interest in low Ci ethanol, both domestically and globally, especially as we.
By step process, but at this point.
Start to see what we believe will be better outcomes in Europe on <unk> modeling is what we're hearing as well.
The equipment John its equipment in.
In construction and in manufacturers. So this is we're on path to.
Speaker Change: As well as as well as some of the other things that are happening relative to modeling and carbon markets.
Somewhere in that third quarter begin to compress carbon and when we turn it on and we're basically turning out a full rate and we have no reason to believe that our partner won't be operational as well. So I mean, I think that when you look at that.
Speaker Change: But I think what's also really important is our doors also.
Of being knocked for getting those carbon credits and also providing us with.
Speaker Change: And the interest that we have not only in.
With payments relative to those credits so I think the value of it is just very well Miss representative and are in our current and our current share price and I think thats going to have to that's going to have to change for the value of these assets are just too high in the future, especially relative to the future cash flows or when you add that corn oil in Nebraska add on top of that protein.
Speaker Change: In.
Low carb low carbon ethanol, which I think Pete don't underestimate the interest in low Ci ethanol, both domestically and globally, especially as we can.
To start to see what we believe will be better outcomes in Europe on <unk> modeling is what we're hearing as well.
As well as as well as some of the other things that are happening relative to modeling and carbon markets.
And both of those plants add on top of that those are some of the best plants that we have generally speaking long term the value of that asset base is underrepresented in our share price, but I think one thing that's really important here is that.
But I think what's also really important is our doors also.
Speaker Change: Being knocked for getting those carbon credits and also providing us with.
As Miss them, we don't talk about much is <unk>.
Speaker Change: We think by the end of the year early into the first quarter, we will have nine of our 10 plants.
With payments relative to those credits so I think the value of it is just very well misrepresentative.
Speaker Change: Approved <unk> RIN generation.
Speaker Change: And our current our current share price and I think thats going to have that's going to have to change because the value of these assets are just too high in the future, especially relative to the future cash flows or when you add that corn oil in Nebraska add on top of that protein in both of those plants add on top of that those are some of the best plants that we have generally speaking long term.
Speaker Change: For a percent or two of our of our capacity.
Speaker Change: And that and that would be three <unk>, because we are you add certain things into fermentation.
Speaker Change: When you talk about $9 eight or 9 million gallons in the spread between <unk> six friends is $2 50 to $3 a gallon.
That is not represented at all and our capabilities as a company on top of that the corn kernel fiber program in California is not represented either.
That asset base is underrepresented in our share price, but I think that's one thing that's really important here is that.
Speaker Change: As Mr. We don't talk about as much is we think by the end of the year early into the first quarter, we will have nine of our 10 plants.
We think in 2025 that also gets added to carbon earnings. So there is a lot more going on here than just sequestering carbon, especially around <unk> RIN generation with our ability to make a percent or two of.
Speaker Change: Approved for <unk> RIN generation.
For a percent or two of our of our capacity.
Of Cellulosic or next generation ethanol as well as what's going to happen with <unk> in the future. So it's a step by step process, but I think each of those each of those milestones will be met and carbon and it's just now a path to turning it on.
And that and that the <unk> III <unk>, because we are you add certain things into fermentation.
When you talk about nine eight or 9 million gallons in the spread between <unk> six rens is $2 50 to $3 a gallon.
In the third quarter of next year.
That is not represented at all in our capabilities as a company on top of that the corn kernel fiber program in California is not represented either.
Hey, Thanks, guys I'll leave it there.
Speaker Change: Thank you.
Speaker Change: We think in 2025 that also gets added to carbon earnings. So there is a lot more going on here than just sequestering carbon, especially around <unk> RIN generation with our ability to make a percent or two of.
Speaker Change: Okay.
Your next question is from the line of Salvator Tiano with Bank of America.
Thank you very much firstly I wanted to check a little bit on any update on blue blade energy I think.
Speaker Change: Of Cellulosic or next generation ethanol as well as what's going to happen with <unk> in the future. So it's.
The plan was.
Speaker Change: Science technology and if it works you will start construction of the pipeline this year 2024 so.
So step by step process, but I think each of those each of those milestones will be met and carbon.
Speaker Change: And it's just now a path to turning it on.
Where do we stand on that.
Speaker Change: Yes, I think from the Blue Blade standpoint, what we've done is we had a partnership and and we looked at several different catalysts are we looked at a catalyst that we had control of and at this point, we have decided not to proceed with that catalyst I think theres other things with the other technologies that are out there that are much quicker to get to market.
In the third quarter of next year.
Speaker Change: Hey, Thanks, guys I'll leave it there.
Thank you.
Speaker Change: Okay.
Your next question is from the line of Salvator Tiano with Bank of America.
Thank you very much firstly I wanted to check a little bit on any updates on blue plate the energy I think.
You bring a new technology market as we learned in Queen sugar and even in sequence and other proteins.
Speaker Change: Takes a long time to scale up and since there are other technologies much like a <unk> honeywell or others that are out there.
Speaker Change: <unk> was <unk>.
Speaker Change: Science technology and if it works you will start construction of the pipeline. This year 2024. So we're.
That that's a much faster path to market for.
Speaker Change: Where do with timing.
Speaker Change: Yes, I think from a blue plate standpoint, what we've done is we had a partnership and and we looked at several different catalysts or we looked at a catalyst that we had control of and at this point, we have decided not to proceed with that catalyst I think theres other things with the other technologies that are out there that are much quicker to get to market.
Speaker Change: Four 8% for alcohol to jet our focus.
From that standpoint is we want to be a provider of low carbon fuels energy and ingredients and and Thats where were spending our time.
Before anything happens and sustainable aviation fuel with alcohol to jet you have to be able to decarbonize, the alcohol and being in a.
Speaker Change: You bring a new technology market as we learned in Queen sugar and even in sequence and other proteins.
Speaker Change: A significant advantage for Green Plains, as we will have some of the largest quantities in the United States and globally on Decarbonize. The alcohol middle of next year, and Thats, where were going to focus our efforts today I think for Green plains to build a jet alcohol to jet plants is probably not something we focus on today, because I think we can earn a significant.
Takes a long time to scale up and since there are other technologies much like a <unk> honeywell or others that are out there we think that that's a much faster path to market for.
For H for alcohol to jet our focus.
And from that standpoint is we want to be a provider of low carbon fuels energy and ingredients and thats where were spending our time.
Return for our shareholders by just making sure that we are a great supplier of low carbon ingredients and fuels.
Speaker Change: Before anything happens and sustainable aviation fuel with alcohol to jet you have to be able to decarbonize, the alcohol and being a.
Speaker Change: Perfect and then I wanted to ask also what's kind of your view for ethanol exports next year and essentially demand from some key end markets.
A significant advantage for Green Plains, as we will have some of the largest quantities in the United States and globally on Decarbonize. The alcohol middle of next year, and that's where we're going to focus our efforts today I think for Green plains to build a jet alcohol to jet plant is probably not something we focus on today, because I think we can earn a significant.
Or keep producing markets like Brazil and India.
Speaker Change: <unk> gold production among others.
Speaker Change: We think this.
This train is going to continue down down the road relative to us finding our path into global markets as they have increased their blend rates you saw Brazil did that you saw.
Return for our shareholders by just making sure that we are a great supplier of low carbon ingredients and fuels.
Other countries have done that we are going to we're hitting some of the European markets as a country as well that the EU is very strong.
Perfect and then I wanted to ask also what's kind of your view for ethanol exports next year and essentially demand from some key end markets.
Speaker Change: We continue to think that we'll continue to gain momentum, especially especially if we see positive news out of course here for U S ethanol and the way they model that relative to 20 year old modeling that's been in place I think they realize that that would grow more corn per acre than 20 years ago and that reduces our overall carbon scores.
Or keep producing markets like Brazil and India.
Speaker Change: Yogurt production among others.
Speaker Change: We think this.
Speaker Change: This train is going to continue down down the road relative to us finding our path into global markets as they have increased their blend rates you saw Brazil did that you saw other countries have done that.
Speaker Change: Generally speaking.
Speaker Change: The demand remains robust globally.
Speaker Change: And I think thats going to continue because I think we are a <unk>.
Speaker Change: <unk> going to we're hitting some of the European markets as a country as well that the EU is very strong.
Speaker Change: <unk>.
Speaker Change: Molecule.
We're 40 or 50 cents less than wholesale gasoline today at a minimum plus in United States with her in but.
Speaker Change: We continue to think that we'll continue to gain momentum, especially especially if we see positive news out of course for U S ethanol and the way they model that relative to 20 year old modeling that's been in place I think they realize that we grow more corn per acre than 20 years ago and that reduces our overall carbon scores.
Globally, we are very very competitive as a molecule and I think we've shown that we can ship significant quantities and I don't believe next year will be any different than this year.
Speaker Change: We need that and I think we also continue to see blends increase in the United States, especially as we go through that.
Generally speaking.
Quarter after quarter of driving demand, which doesn't seem to be going down right now, but we've seen good driving miles in the last couple of months and we saw great demand. This week are relative to the blend rate. So.
The demand remains robust globally.
And I think thats going to continue because I think we are.
Speaker Change: <unk>.
Speaker Change: Molecule.
We're 40 or 50 cents less than wholesale gasoline today at a minimum plus in the United States with the Rins, but.
If you add all that up together and if we can keep the stocks at check as we move into the end of the year.
I think we have a really good shot at a good margin environment in 2025.
Globally, we are very very competitive as a molecule and I think we've shown that we can ship significant quantities and I don't believe next year will be any different than this year.
Speaker Change: Thank you very much.
Your next question is from the line of Christian Owen with Oppenheimer.
We need that and I think we also continue to see blends increase in the United States, especially as we go through.
Hi, Thank you for taking the question.
Quarter after quarter of driving demand, which doesn't seem to be going down right now, but we've seen good driving miles in the last couple of months and we saw great demand. This week are relative to the blend rate. So if you add all that up together and if we can keep these stocks at check as we move into the end of the year.
Christian Owen: A couple here.
Christian Owen: I wanted to ask on first is the protein margins and you touched on this.
Christian Owen: Being a little bit lighter than what.
What you were hoping for that spread over traditional soybean meal, not quite where you want it to be yet, but we will get some of the soybean crush capacity and the transition and the policy in 2025, how are you thinking about the premium for ultra high protein as we come into this transition year next year.
Speaker Change: I think we have a really good shot at a good margin environment in 2025.
Perfect. Thank you very much.
Your next question is from the line of Christian Owen with Oppenheimer.
It's really going to depend on what market. We go to and we state when we are going setting our product internationally as we continue to grow those markets we.
Hi, Thank you for taking the question.
Speaker Change: A couple here.
I wanted to ask on first is the protein margins and you touched on this.
We see.
We realize the full spread and more many times or at least within plus or minus five or 10 points of that.
Being a little bit later than.
What you were hoping for that spread over traditional soybean meal, not quite where you want it to be yet, but as we look at some of the soybean crush capacity and the transition and the policy in 2025, how are you thinking about the premium for ultra high protein as we come into this transition year next year.
Speaker Change: Our pet food demand remains strong we've just.
Speaker Change: Renewed with our long term customer and increased volumes during the first quarter of next year.
On our 50 pro product and and continue to get full access to that with a new plant coming on next year as well.
It's really going to depend on what market. We go to when we state when we are going setting our product internationally as we continue to grow those markets we.
But I think look at Theres, a lot of approaching coming.
We've seen a lot of protein hit the market already.
And we settled out at these type of spreads demand remains really good walk away to see what happens out of out of South America.
Speaker Change: We see.
We realize the full spread and more many times or at least within plus or minus five or 10 points of that.
Look 14, or 15 million tonnes. It sounds like a lot and if it all comes at once is a lot of soy.
Our pet food demand remains strong we've just.
Renewed with our long term customer and increased volumes during the first quarter of next year.
Meal hitting the market, but when ethanol came on we brought 40 million tons of distillers' onto the market as well and so I think we are going to absorb much of that it may take a few more quarters or at least another year or so.
Speaker Change: On our 50 pro product.
And continue to get full access to that with a new plant coming on next year as well.
But look we still earn a margin it's not like it's not like we don't earn a margin and a return on our on our investment.
But I think look it's there's a lot of protein coming.
We've seen a lot of protein hit the market already.
And we settled out at these type of spreads of demand remains really good walk away to what happens out of out of South America.
It's just that we've seen some compression relative to the soy against corn.
Speaker Change: And I think I think that's probably that is most likely stabilizing at this point.
Look 14, or 15 million tonnes sounds like a lot and if it all comes at once it is a lot of soy.
I don't think that.
I think we're going to see much more compression against those spreads and we continue to make our product and sell everything that we produce.
Speaker Change: Meal hitting the market, but when ethanol came on we brought 40 million tons of distillers' onto the market as well and so I think we are going to absorb much of that it may take a few more quarters or at least another year. So.
And one of our past and one of our things that we've always talked about.
Speaker Change: As our.
Way to get out of that as we can make 60% protein products and higher even and we're working on even some of those products today and less lease team is making great progress and we're learning how to reduce the cost of producing sequence.
Speaker Change: But look we still earn a margin it's not like it's not like we don't earn a margin and a return on our on our investment. It's just that we've seen some compression relative to the soy against corn.
I think drives a bigger margin contribution as well as we go into next year with the improvements we're making in some of the other technology improvements we made in the cost of production coming down so it's a little bit of learnings, but I.
Speaker Change: I think I think that's probably most.
Most likely stabilizing at this point.
I don't think that.
I think we're going to see much more compression against those spreads and we continue to make our product and sell everything that we produce.
I think in the next 18 months a lot of this protein will just get absorbed into the market I don't theres not theres not a bunch more soy crush capacity to come on and it seems to be coming on in a in a more methodical pace.
And one of our past and one of our things that we've always talked about.
Speaker Change: As our.
Way to get out of that as we can make 60% protein products and higher even and we're working on even some of those products today and less lease team is making great progress and we're learning how to reduce the cost of producing sequence.
Speaker Change: And you start to see investments being made in export to patient capacity as well to get some of this protein out of the country.
Speaker Change: Okay.
Okay. That's helpful. I was actually thinking theres, some soybean crush capacity, that's not coming on.
Speaker Change: I think drives a bigger margin contribution as well as we go into next year with the improvements we're making in some of the other technology improvements we made in the cost of production coming down so it's a little bit of learnings, but I.
And potentially filing for that could be.
<unk> for your margins next Guy, we're seeing some of that where projects were abandoned because of the cost versus the overall margin structure.
I think in the next 18 months a lot of this protein will just get absorbed into the market I don't theres not theres not a bunch more soy crush capacity to come on and it seems to be coming on in a in a more methodical pace.
Speaker Change: And we believe thats happening as well that it will come out slower or not come on at all.
And I think that will be helpful. Overall, and then we get into next year and and let this rd market settle out and see where that settles out from the oil standpoint as well.
And you start to see investments being made in export to patient capacity as well to get some of this protein out of the country.
Speaker Change: Super.
And then my final question.
Okay. That's helpful I was actually thinking.
Speaker Change: Ted.
The $2 50 to 300 million run rate value of carbon jets from those Nebraska asset probably not baked into most models at this point in time.
<unk> crush capacity, that's not coming on.
Speaker Change: And potentially filing so that could be.
<unk> for your margins next well, we've seen some of that where projects were abandoned because of the cost versus the overall margin structure.
I wanted to understand now that that is becoming much more within the next 12 months timeframe.
And we believe that's happening as well that it will come on slower or not come on at all.
Speaker Change: And I think that will be helpful. Overall, and then we get into next year and let this rd market settle out and.
Help us understand the mechanics of those credits how you think about monetization of them what sort of tolling fees you might have to pay to use that pipeline just give us a little bit more granularity. So that we can build that into our forecast.
And see where that settles out from the oil standpoint as well.
Speaker Change: Okay.
And then my final question.
Speaker Change: Okay.
Speaker Change: Ted.
Ted: The $2 50 to 300 million run rate value of carbon jazz from those Nebraska assets, probably not baked into most folks' models at this point in time.
So let's start from the pipeline standpoint, we have agreement with Trailblazer on transport and injection and Thats, just a fixed fee and there is no sharing of our upside in our credit values from the revenue side. So we just pay a standard transport midstream have relationship that we have with tallgrass and.
Help us understand now that that is becoming much more within the next 12 months timeframe.
Help us understand the mechanics of those credits how you think about monetization of them what sort of tolling fees you might have to pay to use that pipeline just give us a little bit more granularity. So that we can build that into our forecast.
Our with Trailblazer owned by Tallgrass and Thats really it is very simple so and then what we generate as revenue from 45, <unk> 45 Q.
And either voluntary credits or else CFS credits and Thats. The revenue side of the equation and I think we've outlined in the past our carbon score reduction that Central City Wood River and in York, which will be on.
Speaker Change: Okay.
So let's start from the pipeline standpoint, we have agreement with Trailblazer on transport and injection and Thats, just a fixed fee and there is no sharing of our upside in our credit values from the revenue side. So we just pay a standard transport.
The pipelines to start.
I will get in New York in a second but.
When we look at the revenue side of the reduction which is <unk> <unk> per gallon for points from our starting point is everything below 50 50 carbon score.
Midstream have relationship that we have with tallgrass and our with trailblazer owned by Tallgrass and Thats really it is very simple so and then what we generate as revenue from 45, <unk> 45 Q.
Speaker Change: That's on the revenue side with the 45 Z on top of that we'll be generating over 800000 tons.
High quality carbon credits that either will flow into California.
Speaker Change: And either voluntary credits or else GFS credits and Thats. The revenue side of the equation and I think we've outlined in the past our carbon score reduction that Central City Wood River and in New York, which will be on.
Speaker Change: From a fuel standpoint, and we'll monetize L CFS and ore from <unk>.
Speaker Change: Voluntary markets, so monetizing the 45 Z and monetizing the carbon credit.
The pipelines to start.
Speaker Change: I will get into New York in a second but.
Speaker Change: It will be something that there are well developed markets to do that we've seen those trades in that 90% to 95% of face value happen and that's in our numbers as well so we're going to sell those credits and monetize them and not use them internally.
When we look at the revenue side of the reduction which has two cents per gallon for point from our starting point is everything below 50 50 carbon score.
Speaker Change: Yes, we need to down the road from a standpoint of then we can realize a 100% monetization of those credits. So we add all of that revenue up we discounted by somewhere between five and 10% to get to our net revenue deduct our transport fees, a little bit of operational cost for the facility to get to an EBITDA EBITDA number now.
Speaker Change: <unk>.
Speaker Change: When we look at York York is today as a 45 Q plant because they start with a higher carbon score, but we are on deck to lower their carbon score through low energy distillation that.
So we would expect that we will try to get that into service within the first six months to 12 months of their operations. So that we can have that plant qualify for 45 Z as well, which is upside to those numbers. Once we're able to do that and we'll do other things to reduce our carbon scores overall to give upside to those numbers.
So there's 287 million gallons generating 800000 tons or more of carbon credits.
And and we today have interest from.
Speaker Change: Companies and as and the broker markets to take our take our credits to market or promote.
With some structure to monetize those credits the day, we start and we could actually start selling credits before we even start to sequester carbon knowing that we will be sequestering carbon at a certain date.
Speaker Change: As well, which is upside to those numbers once we're able to do that and we'll do other things to reduce our carbon scores overall to give upside to those numbers. So it's 287 million gallons generating 800000 tons or more of carbon credits.
Speaker Change: We have interest in that as well so generally speaking the day.
Demand for the alcohol remained strong from alcohol to jet players and the demand for the credit remained strong from.
From the tax credit markets, all the way up from the Big Tech companies that need to buy offsets and they can use our tax credits all the way down.
Speaker Change: And and we today have interest from.
Companies and as and the broker markets to take our take our credits to market and or with.
Into just monetizing NTL CFS market does that helpful for you.
With some structured to monetize those credits the day, we start and we could actually start selling credits before we even start to sequester carbon knowing that we will be sequestering carbon at a certain date.
Speaker Change: Okay.
Did we lose everybody no less of lobster operator.
And we have interest in that as well so generally speaking the dim.
Speaker Change: Time for the next call.
<unk> for the alcohol remains strong from alcohol to jet players and the demand for the credit remained strong.
Your next question is from the line of Matthew Blair with Tpa Itch.
Speaker Change: From the tax credit markets, all the way up from the Big Tech companies that need to buy offsets and they can use our tax credits all the way down.
Thanks, and good morning, and congrats Jim and Phil on your respective.
Matthew Blair: Moves here.
Matthew Blair: I wanted to ask about the election risks to the IRS and.
Speaker Change: Into just monetizing in steel CFS market does that helpful for you.
The associated credits of <unk> 45 in Q I think the Wall Street Journal had a story yesterday talking about how a potential candidate for Treasury Secretary was talking about scrapping the entire IRA.
Speaker Change: Okay.
Did we lose everybody knows we mentioned water operator.
Matthew Blair: What do you make of that.
Speaker Change: How much does that concern you in there.
Time for the next call.
Your next question is from the line of Matthew Blair with Tpa Itch.
Speaker Change: There anything you can be doing today to potentially mitigate some of that risk.
I'll, let I'll, let Debbie comment on that first and I'll close off after that sure. So thanks for the question Matthew we saw that article and Theres been a lot of talk on this campaign of different public and sweep of trying to eliminate the entire IRA you recall that they tried to do this with the debt ceiling lift back in April of 'twenty, three and there were 7%.
Thanks, and good morning, and congrats Jim and Phil on your respective moves here.
I wanted to ask about the election risks to the IRA and the associated credits like 45 billion in Q I think the Wall Street Journal had a story yesterday talking about how a potential candidate for Treasury Secretary was talking about scrapping the entire IRA.
Public in house members, all of whom had voted against the IRA to block that from happening as it relates to <unk> 45.
What do you make about.
Debbie: So there remains bipartisan support for not only preserving but extending 45 Z. Several bills have been introduced with both the Republican and Democratic support to extend that credit and you got to remember that there's now multiple industries that are interested in this is not just biodiesel and renewable diesel and ethanol is also sustainable aviation fuel because the 40 b credit rolls into the 45.
How much does that concern you and is there anything you can be doing today to potentially mitigate some of that risk.
So we believe that regardless of the election outcome, there will be support for that program and while some aspects of the IRS may be curtailed if Republicans control all three corners, we think the prospects are bright for having that extended to have a much longer runway.
And one last thing Matthew is the 45 Q, let's just say worst case scenario at a 45 Q.
Is the remaining program if that were to happen, which we do not believe that will happen that is not part of the IRS.
Speaker Change: And as expanded during the IRA, but it's not part of the IRA and I think that that's an important point as well and it's a 12 year program.
That starts when you start sequestering carbon it doesn't go away from two years ago to 10 years from now it goes away 12 years. After you start to sequester carbon it's been permanent for a long time.
And the program and it's a direct pay program as well for the first five years. So while we certainly would not like that to be the program because I think that's much more opportunities around 45, if that were worst case scenario than we would have less revenues around carbon but it would still be a significantly profitable project instead of paying off in <unk>.
Less than a year, maybe would pay off in a year and four months and it's really not that much of a big difference for us, but it's certainly it's nicer to have the 45, we do believe that will stay intact.
Speaker Change: Thanks, that's helpful and then earlier in the call there was some talk about Mount Vernon.
Speaker Change: By an increase in capacity.
Speaker Change: Total.
Capacity increases that youre expecting in does that shift anything on your product slate.
Speaker Change: Would you expect to.
Please your exports as a result of that new capacity.
Speaker Change: So Mount Vernon is complete we've redone all the full conveyor systems, among other bins and tanks and systems and processes and that was needed we're starting to.
Per months, and it's really not that much of a big difference for us, but it certainly is nicer to have 45, we do believe that will stay intact.
Ramp that plant back up as we speak and that should add about 20 million gallons of.
Speaker Change: Thanks, that's helpful and then earlier in the call there was some talk about Mount Vernon.
Speaker Change: Yearly production run rate capacity, there and when we add gallons, we add we add pounds of corn oil and we have we had tons of protein on top of that that is a protein system down there as well so it's going to be all three components there.
<unk> increase in capacity, what's the total.
Capacity increases that youre expecting in does that shift anything on your product slate.
Would you expect to increase your exports as a result of that new capacity.
We're waiting for a final construction of the.
So Mount Vernon is complete we've redone all the full conveyor systems, among other bins and tanks and systems and processes and that was needed we're starting to.
Speaker Change: Our T O instead.
Instead of a co thermal oxidizer through a regenerative thermal oxidizer and.
That will allow the plant to.
Ramp that plant back up as we speak and that should add about 20 million gallons of.
Get back to the traditional run rate that is another 20% to 25 million gallons of opportunity per year as well.
Speaker Change: Yearly production run rate capacity, there and when we add gallons, we add we add pounds of corn oil and we have we had tons of protein on top of that that is approaching system down there as well so it's going to be all three components, they're buying we're waiting for a final construction of the.
And that project should be completed in the first quarter of next year.
Plant should be running at a much higher rate, but because of the longer term effects of this piece of equipment, we haven't been able to and then we brought protein.
Speaker Change: And now combined.
Overloading all of the systems, and we're going to be able to get that back in line sometime hopefully early in the first quarter of next year as well so that the two of those combined should add 40 to 50 million gallons 40 about 40 million gallons of.
Speaker Change: <unk>.
Speaker Change: Our T O.
Instead of a PEO thermal oxidizer through a regenerative thermal oxidizer and.
That will allow the plant then too.
Get back to the traditional run rate that is another 20% to 25 million gallons of opportunity per year as well.
Speaker Change: Of additional capacity that we bring online.
Speaker Change: And.
Speaker Change: But it doesn't necessarily change to where we ship, it's just shipping more product to the same markets.
That project should be completed in the first quarter of next year that plant should be running at a much higher rate, but because of the longer term effects of this piece of equipment, we haven't been able to and then we brought protein not.
Those markets are ready to absorb everything we bring on.
Speaker Change: Thank you.
Speaker Change: Okay.
And now combined it's just overloading all of the systems and we're going to be able to get that back in line sometime hopefully early in the first quarter of next year as well so that the two of those combined should add 40 to 50 million gallons 40 about 40 million gallons of.
Your next question is from the line of Craig Irwin with Roth Capital Partners.
First I would say yes.
Graduations filling the promotion Jim going to Miss you, it's been great working with you. This last.
Of additional capacity that we bring online.
Many years.
My question is around clean sugar I wanted to ask for a little bit more color.
Todd do you feel some of the projected economics that you've talked about this last couple of years.
Speaker Change: We're going to be confirmed by the plant startup.
Speaker Change: And then if we rewind about a year there was some optimism that we could start seeing additional facilities.
Once this plant was up and running what do you expect to see out of Shannon Donna what do you need to see out of out of this plant to.
To make a go decision to invest in the next the next facility and can you remind us maybe on the Capex and project returns.
That we should be thinking about.
Speaker Change: Yeah.
Speaker Change: Yes. Thanks.
We have significant optimism for.
This product the production process.
Speaker Change: So there is definitely things that we will do different and a much larger facility than we did here.
Speaker Change: Relative to some.
Speaker Change: Some of the equipment that we had outlined in the past where we had some had some early early issues that we worked through.
And fix some of those issues, but I think the engineering plant number two would be different than flat number one just in terms of improving the capabilities of the asset.
The <unk> are very similar to what we when we started this five years ago. We said its 60 787 cents a gallon of uplift relative to making alcohol on those still exist today, even relative to sugar prices and sweetener prices that are out there on top of lower corn and input costs.
Speaker Change: So from that standpoint, nothing's changed economically on how we think about a full blown bill.
Speaker Change: Build of its clean sugar facility at at a plant either either ours or even potentially stand alone.
With the support of a gen. One ethanol plant so additional facilities more to come on that I think what we want to do is like I said, it's only been a week.
We've been at it give us a little more time, but I think what has been proven is that how we can make the product. We can we're going to we're shipping the product. It's in railcars that will be shipped in trucks. It will end up on on People's Doorsteps for them to analyze we still have to get food grade certification and we'd like to run at just a little bit longer than a week or two.
Speaker Change: <unk>.
And continue to optimize and continue to drive better and better product quality, because I think we continue to do that it's not just around 95% dextrose equivalent.
Additional facilities more to come on that I think what we want to do it. So you know like I said, it's only been a week.
There is there is there are $63 48 and.
And I think that we want to make sure we can make all of those as well and then we want to make sure we get into the food market. So it will be a little bit before we decide on serial number two or plant number two but I can tell you based on early returns, we're very optimistic that that technology will be radically transform.
We've been at it give us a little more time, but I think what has been proven is that how we can make the product. We can we're going to we're shipping the product. It's in railcars that will be shipped in trucks. It will end up on People's doorsteps for them to analyze we still have to get food grade certification and wed like to run at just a little bit longer than a week or two.
Speaker Change: Not just what we can do at a dry mill, but.
Speaker Change: But in the industry in general over the long term.
Two and continue to optimize and continue to drive better and better product quality, because I think we continue to do that it's not just around 95% dextrose equivalent.
In the next six to 12 months, but.
Speaker Change: Capex still are still working through that we've seen some stuff come down and some stuff go up labor is still a challenge when you build anything.
Speaker Change: There is there is there are $63 48.
And long term long lead time on.
Speaker Change: And I think that we want to make sure we can make all of those as well and then we want to make sure we get into the food market. So it'll be a little bit before we decide on serial number two our plant number two but I can tell you based on early returns, we're very optimistic that that technology will be radically transform.
Electrical gear and switches and those type of things remain a significant challenge.
With all of the data center demand that exists in the United States and other things that are happening around nuclear and those type of things, but when we look at CST and we look at Queen sugar and we look at that what we can make.
Not just what we can do at a dry mill, but.
Out of a dry grain facility when everybody said you can't do that arm Italian after this right now we are absolutely 100% doing it it's amazing technologies from fluid quip saw some work to do relative to what we would do maybe in serial number two but but we are really really optimistic about the future of this technology as a whole.
But in the industry in general over the long term not necessarily in the next six to 12 months, but.
Capex still are still working through that we've seen some stuff come down at some stuff go up labor is still a challenge when you build anything.
And in long term long lead time on electrical gear and switches and those type of things remain a significant challenge.
Thank you for that so my follow up question I guess, it's a two part question right.
With all of the data center demand that exists in the United States and other things that are happening around nuclear and those type of things, but when we look at CST and we look at clean sugar and we look at that what we can make.
Speaker Change: Can you maybe share with us.
Speaker Change: Well the housekeeping side is really sales mix on hydro products 50 versus 60 probe.
Do you have.
Speaker Change: Estimated mix exiting the year and then.
Comments around what you think is reasonable for Green plains to target in 2025, and then the second part of the Blue Sky Economics out of high probe.
Speaker Change: One of the more exciting parts of the story was always the the collaboration with Novozymes for some tailored products that might have improved nutritional profile.
And make it even better.
Speaker Change: Match for me.
Many of the markets that Youre pursuing do you have an update on the on the Novozymes partnership.
Is there anything we should look for there.
Speaker Change: Over the next number of quarters.
I'll start with that I'll, let's talk about Leslie talk about some of these things that we're doing around product quality.
And nutritional quality and working with other customers on that but we have we have re signed our agreement with Novozymes and our partnership.
Speaker Change: We did it we did it quietly.
Speaker Change: As we are working together.
Together on several products and several opportunities. We are it's an amazing partnership between Green Plains and Novozymes on what we've been able to accomplish together and especially around development of higher proteins and different nutritional characteristics that.
We continue to work on so that has been that has been renewed on top of that we talked about our pet food customer has begun to renew for 2025 as well as we just we just finished the first quarter and higher at higher volumes in 2025, and so we're really really excited to work together.
On all different types of recipes with novozymes inclusive of generating.
Generating these <unk> rins as well everything evolved in all of these technologies and when we started out we thought we put protein everywhere and along came the IRA and now we're going to invest capital into carbon sequestration.
Speaker Change: With significant returns in.
Speaker Change: Someday.
Absolutely confident we will continue to build protein systems as we absorb this protein into the market because what we have is is that depending on the species. It is a very special product that doesn't really interesting things are relative to that we continue to work with some of the largest pet food customers in the World 60 Pro inclusions in 2025, and we believe we are.
We are going to get a significant lift relative to demand from this year to next year. Today. We are we are making 60 pro product. We are shipping 60 pro product around the world.
Speaker Change: It's always.
Speaker Change: So we always say it always takes longer than we havent really wanted to take but when you kind of look at.
When you kind of look at what we've been able to accomplish so far and where we've been able to ship this product.
Speaker Change: Our team has done a great job of finding.
Finding homes for their product and we are still working with those same large pet food customers.
60 program Fusions in 2025 and.
And we believe we are we are going to get a significant lift relative to demand from this year to next year. Today. We are we are making 60 pro product. We are shipping 60 pro product around the world.
Getting 60 pro in large volumes into <unk>.
Into their into their systems, where we want to make sure, though and Leslie maybe talks about this is that what we send them is the same everyday out of every location and.
And that's why we wanted to make sure that we got we did a little bit of Capex and Wood River in Central City and wanted to make sure that we are able to ship that product consistently.
Speaker Change: It's always as we always say it always takes longer than we havent really wanted to take but when you kind of look at.
When you kind of look at what we've been able to accomplish so far and where are we have been able to ship this product.
We are developing new markets in Asia, and South America, we expect.
Our team has done a great job.
Finding homes for the product and and we are still working with those same large pet food customers.
Speaker Change: Volumes to ramp up as we get through Jan and Judy and really ramp up in July <unk> of next year, we have very large volumes, we expect to kick in in July of next year and we have other customers that we can sell more volumes of sequence without negatively impacting anything else that we do it's only positive impacts.
On getting 60 pro in large volumes into into their into their systems, but we want to make sure, though and Leslie maybe talks about it is that what we send them. It's the same everyday out of every location.
Speaker Change: So overall.
Speaker Change: Everything always takes longer as we always know about the demand for our product remains strong and we expect to make significant inroads into 64 market next year, Leslie I'll talk a little bit about some of the things. We're doing are quality sure, yes, as Todd mentioned earlier.
And that's why we wanted to make sure that we got we did a little bit of Capex in Wood River in Central City and wanted to make sure that we are able to ship that product consistently.
We are developing new markets in Asia, and South America, we expect.
Youre kind of looking at our book and where we're looking at consistency on the product side really making sure that that is where our <unk>.
Speaker Change: Volumes to ramp up as we get through Jan in June and then really ramp up in July to reduce of next year. We have very large volumes, we expect to kick in in July of next year and we have other customers that we can sell more volumes of sequence without negatively impacting anything else that we do it's only positive impacts.
Customers can actually go to increased.
Speaker Change: <unk> levels and on the other side, which was already mentioned is really the cost reduction. So that's been an opportunity for us to really tailor to use of our biological system to fine tune. It on top of that the team has been working on increased protein concentrations, which is again almost a third generation product that we're working on but I think the main focus.
So overall.
Everything always takes longer as we always know, but the demand for our product remains strong and we expect to make significant inroads into the 60 pro market next year, Leslie I'll talk a little bit about some of the things. We're doing are quality sure, yes, as Bob mentioned earlier.
Has been between that consistency in the Opex reductions.
Youre kind of looking at our book and where we're looking at consistency on the product side by really making sure that that is.
Excellent well, thanks again for taking my questions and congratulations on the really strong crush margins. This quarter, it's good to see those come through.
Customers can actually go to increased <unk>.
Leslie: Allusion levels and on the other side, which was already mentioned is really the cost reduction. So that's been an opportunity for us to really tailor to use of our biological system to fine tune it.
Speaker Change: Thank you.
Speaker Change: Yeah.
I would now like to hand, today's call back over to Todd Becker CEO for any closing remarks.
Todd Becker: Yeah, Thanks, everybody for jumping on the call and participating in today's call are continue our teams continue to execute at a high rate. We look forward to sharing our continued progress with you in coming months.
We also want to make sure that.
We provide you with the information you need to make the best decisions around our company and as you can see with our carbon strategy, which is very unique and very advantaged and very early in the cycle is going to be providing significant what we believe shareholder value creation.
Speaker Change: Creation on top of that all of our products are starting to kick in.
And obviously when when strong margin environment exists in the base and the base product of.
Our fuel, which we believe will start to ramp back up as we get into 2025, I think we are well positioned to capitalize on all of that we've invested in all of the strategic advantage that we have as a company and and again, we wish Jim Best of luck and Phil Best of luck in his new and his new role and we really appreciate your support and we look forward to talking to next.
Thank you for everybody being on the call.
Speaker Change: This concludes today's call. Thank you for joining you may now disconnect.
Leslie: [music].