Q4 2024 Aemetis Inc Earnings Call
Speaker Change: Welcome to the Aemetis fourth quarter and year end, 2024, Earnings Review Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Mr. Todd Waltz, the Executive Vice President and Chief Financial Officer of Ametis. Mr. Waltz, you may begin.
Speaker Change: Thank you, Tom. Welcome to the Aemetis sports quarter and year-end, 2020.
earnings review conference call.
Speaker Change: Joining us for the call today is Eric McAfee, the founder, chairman, and CEO of Aemetis, and Andy Foster, the president of Aemetis Advanced Fuels.
Speaker Change: We suggest visiting our website at ametis.com to review today's earnings press release.
Speaker Change: corporate and investor presentations, filings with the Security and Exchange Commission, recent press releases, and previous earnings conference calls. Before we begin our discussion today, I'd like to read the following disclaimer statement.
Speaker Change: During today's call, we'll be making forward-looking statements, including without limitations, statements with respect to our future stock performance, plans, opportunities.
Speaker Change: and Expectations with respect to financing activity and the execution of our business plans. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in RSCC filings. Investors are cautioned that all forward-looking statements made on this call involve risks and uncertainties.
Speaker Change: and that future events may differ materially from the statements made. For additional information, please refer to the company's Security Exchange Commission filings, which are posted on the SEC Edgar system and on our own company website.
Speaker Change: Gap, because we believe these non-GAAP measures serve as a proxy for our company's sources and uses of cash. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in today's earnings release.
Speaker Change: Adjusted EBIDA is defined as net income or loss, plus to the extent deducted in calculating such net income. Interest amortization expense, gain on debt extinguishment, USDA cash grants, income tax benefit, or expense intangible and other amortization expense, accretion expense, depreciation expense.
Lawson, Ashley Disposal, and Chair-Based Compensation Expense.
Speaker Change: Let's review the financial results for the year end at December 31, 2024.
Speaker Change: Revenants were $268 million for the 12 months ended December 31, 2024 compared to $187 million for 2023 with all three segments reporting increases.
Speaker Change: Specifically, California ethanol increased by $57.7 million from operating during the full year. India biodiesel increased.
Speaker Change: $15.7 million from stronger oil marketing company, Tender, Delivery Volumes, and California Renewable Natural Gas increased $7.6 million from increased production, stronger sales of rims, and sales of LCFS credits.
Speaker Change: Cost of Good Sold increased from $184.7 million during the 12 months ended December 31, 2023 to $268.2 million during the same period in 2024 and keeping with the change in revenue for each of the segments.
Speaker Change: Gross Loss for the 12 months ended December 31, 2024 was $580,000 compared to gross profit of $2 million during the same period in 2023.
Speaker Change: Art Dairy Renewable Natural Gas Segment, accounted for $5.4 million of gross profit, principally from the sale of environmental attributes for the year end of December 31, 2021-24.
Speaker Change: Selling General Administrative Expenses Remain Constant at $39.8 million during the 12-month ended December 31, 24, compared to $39.4 million during the same period in 2023.
Speaker Change: Operating loss was $40.4 million for the 12 month ended December 31, 24, compared to an operating loss of $37.4 million for the same period in 2023.
Speaker Change: Interest expense was $59.3 million during the year ended December 31, 2024, which was a $5.5 million increase from interest expense of $64.8 million during the year ended December 31, 2023.
Speaker Change: Income Tax Benefit of $10.8 million during 2024 and $53.7 million during 2023 represent tax credit sales of $12.3 million.
and $55 million respectively.
Speaker Change: Netloss was $87.5 million for the 12-month end of December 31, 2024, compared to a net loss of $46.4 million during the same period in 2023.
Speaker Change: Cash, at the end of the fourth quarter of 2024, was $898,000 compared to $2.7 million on December 31, 2023.
Speaker Change: Capital Expenditures for Carbon Intensity Reduction Projects, and the expansion of biogas, production capacity, were $20.3 million for 2024 as our engineering and construction teams move forward with low carbon. Thank you very much.
Production Capacity and Energy Efficiency Projects [inaudible]
Speaker Change: Now, I'd like to introduce the founder, chairman, and chief executive officer of Aemetis, Eric McAfee, for a business update.
Thanks, Todd.
Speaker Change: benefits from public policy that supports domestic energy producers that grow markets for agricultural and waste products.
Speaker Change: The strong year-over-year growth that we achieved in 2024 in each of our businesses and biogas ethanol and biodiesel.
Speaker Change: is expected to be further supported by federal and state policies that are being implemented this year.
Speaker Change: The President has repeatedly stated his strong support of ethanol and agricultural-based biofuels in executive orders and public statements, so we are hopeful that the new administration will continue to support domestically-produced renewable fuels that support energy independence.
Speaker Change: Let's review some of the key government policy issues that had a significant impact on our businesses and we expect will be strongly supportive of our continued growth.
First, the California LCFS credits.
Speaker Change: After four years of the policy development, amendments to California's low carbon fuel standard were approved by the California References Board on November 8, 2024, setting 20 years of increasing mandates for low carbon fuels in California.
Speaker Change: The LCFS amendments mandate a 9% decrease in carbon intensity for fuels in 2025.
Speaker Change: and have an ongoing automatic adjustment mechanism to provide confidence in a higher price for LCFS credits in order to attract yet inequity investments in low emission transportation fuels, infrastructure, and vehicles.
Speaker Change: In its dissipation of the implementation of the new mandates, the price of LCFS credits increased. From $44 last year to $75 by February 2025, a surprise delay occurred however.
Speaker Change: Recently, the implementation of the amended L.C.F.S. was delayed by the California Office of Administrative Law due to a request to provide clarity in certain new language in the L.C.F.S. amendments.
Speaker Change: This unexpected delay and implementation of the LCFS amendment caused a rapid 30% decrease in the price of LCFS credits as the market waits for final adoption of the LCFS amendments to occur.
Speaker Change: We expected the process of final adoption of the LCFS amendments. We'll occur later this year. LCFS prices should increase thereafter.
Speaker Change: as the 9% reduction in 2025 will take effect, as will a 20% limitation on the use of crop-based feedstocks for renewable diesel.
Speaker Change: by 2027. The implementation of the LCFS amendments is designed to reduce the 32 million credits currently in the LCFS credit bank.
Speaker Change: 2-0. And, according to Carb's own estimate, the LCFS credit price is expected to increase significantly higher, eventually approaching $200 per ton.
Metis: biogas, ethanol, carbon sequestration, and other businesses are designed to benefit from an increased LCFS credit price, as we produce LCFS credits through the production of low-carbon intensity renewable fuels.
Declanify the Impact Act.
Metis: Renewable Natural Gas generates about 40% of the price of an LCFS credit per MMBTU of production. So, a $200 LCFS price per ton equals about $80 of LCFS credit value per MMBTU once our provisional pathways are in place.
Metis: at an average LCFS price of $150 per ton. Amitis by a gas would generate credits worth through $60 million per year from the sale of $1 million MBTUs of Derrick R&G.
Second, the Federal Renewable Fuel Standards
Metis: In addition to LCFS Credits, the sale of Renewable Natural Gas generates D3 Rins with a value
Metis: Combined with the LCFS credit, this represents up to $120 per MBTU from just these two credits alone.
Metis: Third, the Federal Section 45-Z Production Tax Credit, which started on January 1, 2025.
Metis: The US Treasury released tax guidance in January 2025 that we are now using for the planned sale of tax credits for both our keys ethanol plant and our renewable natural gas businesses. We expect further guidance from Treasury will be issued this year to assist in the calculation of the tax credits.
Fourth, Federal Section 48 Investment Tax Privilege [inaudible]
Metis: After selling 63 million dollars of investment tax credits in September 2023, we completed the sale of additional investment tax credits generated by the Amitis Biogas projects and our Keys Plant Solar Project in December 2024 and February of this year.
Metis: We received net cash proceeds of about $11 million in January and $6 million in February 2025. For a total of $17 million of cash received from investment tax credits so far this year.
Metis: We expect the same buyer to purchase additional federal investment tax credits this year, and potentially also purchase production tax credits.
Servus!
Metis: 15% ethanol blend approvals. Two weeks ago, the US EPA approved the year-round sale of gasoline containing up to 15% ethanol known as E15 for eight Midwestern states, with an indication that all 48 49 states other than California should be approved this year.
Metis: Broad use of E-15 would increase the size of the U.S. ethanol market by up to 50 percent. California is the only state that sets its own fuel blends, and currently E-15 is not authorized.
Metis: However, California Governor Newsom issued a letter instructing CARB to complete the necessary regulatory work to be able to approve E-15 in California as soon as possible.
Metis: thereby reducing the state's current 90% petroleum gasoline mandate that drives higher gasoline prices for consumers and businesses.
Metis: A 15% ethanol blend in California is projected to decrease gasoline prices by $0.20 per gallon, saving drivers about $400 per year in fuel costs equal to $2.7 billion per year statewide, according to a UC Berkeley Naval Academy study.
Metis: E-15 approval in California would increase the market for ethanol by more than 600 million gallons per year, and a 15% ethanol blend nationwide would enable the ethanol industry to grow revenues by up to 50% to more than 20 billion gallons per year.
Metis: Combined the ongoing implementation of these five policies directly and positively impact our business by significantly increasing the value of our fuels and by expanding the markets that we supply.
Let's review each of our businesses
Metis: In the India biofuels business, we completed deliveries of $112 million during the one-year period ending September 2024. Driven by biodiesel sales to the three government-owned oil marketing companies, or OMCs, under a cost-plus contract structure.
We completed these contracts with excellent production and delivery performance.
Metis: The positive impact of cost plus pricing that has been used by the OMC's to purchase biodiesel is expected to continue for the foreseeable future. Our India business has generated positive EBITDA in the past and has funded its own operations and capacity growth from these phones to contracts.
Metis: Unfortunately, the price of feedstock used in the OMC pricing formula increased significantly in Q4 2024, and OMC delayed taking deliveries of biodiesel. After a six month period of negotiations, OMCs are expected to issue a new tender for biodiesel and begin taking deliveries in Q2 2025.
Metis: This past July , our new Managing Director of the India Business joined the company after serving as the Chief Executive Officer of the GE Joint Venture in India to build renewable power plants.
Metis: We have signed an employment agreement with an outstanding professional with recent IPO agreement experience who will serve as our chief finance officer beginning in June 2025.
Metis: We have signed a lease to move our India headquarters into a newly built office building in Hyderabad next month to support our expanding management team for the operation of multiple plant sites and new products.
Metis: The timing of the planned IPO is currently estimated for late 2025, both first half of 2026 due to the delay in OMC deliveries.
Metis: But, we expect to benefit from renewed government commitment to biodiesel blending in new OMC orders, supporting renewed retail and institutional industrial interest and renewable biodiesel later this year.
Metis: Andy Foster, President of the Amitis Advance Fules, will now review our North American Businesses. Andy? Thanks, sir. In the Amitis Biogas business, we continue to grow the number of derries and digestors to reach an expected 550,000 MMBTU per year of production capacity in 2025.
Andy Foster: Biogas has plans to expand our footprint to 26 areas operating, or under construction by the end of 2025, increasing production capacity to 1 million MMB2U and MMB2U per year in 2026.
Andy Foster: Our existing projects are funded by 20-year loans guaranteed by the US DA, Rural Energy for America, or REAP program.
Andy Foster: We have received the draft USDA Conditional Commitment for the next $25 million rural energy for America alone.
Andy Foster: An additional $50 million of USDA guaranteed funding is in process with expected closings this year for a total of $75 million of new USDA guaranteed long-term financing for biogas digester construction.
Andy Foster: Our LCFS Provisional Pathways for Seven Darries have been completed and completed the third party verification process and are now in the final review and approval stage at CARB. We expect these pathways to be approved in March or April .
Andy Foster: In the event that the final approval is received in April , instead of this month, we would begin to show the increased revenues and cash receipts from LCFS pathway approval in Q3 of 2025.
for the Aemetis F and All business.
Andy Foster: The eventual approval of an E15 blend in California as well as at the federal level is expected to have a positive impact on ethanol industry margins as retailers seek to provide lower-cost fuel to consumers and to significantly expand the market demand for ethanol in California.
Andy Foster: A major step in improving our cash flow and energy efficiency at the key's plant is the installation of a mechanical vapor recompression system or MVR.
Andy Foster: We have completed detailed engineering and have begun equipment procurement and fabrication offsite.
Andy Foster: Over the past year, we have also completed tie-ins and other plant modifications that will accelerate the installation process, minimizing plant operation and interruptions during the construction period.
Andy Foster: The MBR Energy Efficiency Project is expected to cost approximately $30 million and has been awarded about 20 million in grants and tax credits from the CEC, PG&E, and the US Department of Energy and Treasury.
Andy Foster: Carbon Capture subsidiary has received California State approval to drill a characterization well. The first phase of drilling and installation of the conductor pipe for the characterization while was completed late last year.
Andy Foster: We plan to use the data from the characterization well to obtain a federal class six sequestration well permit and then construct a CO2 injection well in compression system at our riverbank site to sequester approximately 1.4 million tons of CO2 per year.
Andy Foster: CO2 sequestration has strong support from the oil and gas industry so we expect the final 45Q federal tax credit to be supported this year and the EPA Class 6 well approval process to be faster to obtain them under the prior administration.
Andy Foster: In the development of our Aemetis Sustainable Aviation Fuel and Renewable Diesel Business during 2024, we received authority to construct air permits for our planned 90 million gallon per year SAF and our D-Plan to be built in Riverbank, California.
Andy Foster: When operated to produce only sustainable aviation fuel, the design capacity of the plant is about 78 million gallons per year of SAF.
Andy Foster: With the expanding demand for SAF and with a limited supply, we continue to discuss the use of innovative pricing structures with our airline customers and to accelerate the financing construction and operation of our SAF plant.
Andy Foster: A key issue for SAF production is the Federal 45Z production tax credit, which replaces the former Blender's tax credit.
Andy Foster: Further clarification and confirmation of the calculation of the 45Z revenues will be needed to support the financing of the SAFRD plan.
Andy Foster: Additionally, California regulators need to step up their efforts to enact strong SAF.
Andy Foster: mandates by including this fuel in the LCFS and setting volumetric requirements. Most major airlines have expressed support for adopting SAF and are looking for additional regulatory support from the EPA and states to move investments forward to expand production capacity.
Andy Foster: Eric, thanks Andy. Appreciate it. In summary, all five Aemetis business segments are synergistic and create what we refer to as a circular bio-economy.
Andy Foster: We are very pleased with the approval of the updated low-carbon fuel standard in California and look forward to its formal implementation.
Andy Foster: As well as the expected approval of 15% ethanol plants to reduce gasoline prices at the pump and to expand domestic markets for agriculture.
Actor, Cultural, and Waste products.
Andy Foster: Continue progress on implementing Federal 45Q and 45Z tax credits will drive new investment and job creation as we continue to build new production of natural gas from dairy waste, ethanol from agricultural products.
Andy Foster: SCF and R&D Renewable Diesel, as well as the sequestration of CO2.
Andy Foster: We continue to work toward an IPO of the growing India biodiesel business, though our pace was slowed by the delay in biodiesel deliveries to oil marketing companies and now is expected to benefit from a new commitment to biodiesel blending by the India government and OMC's.
Andy Foster: Our company's values include a long-term commitment to building value for our stockholders, the empowerment of and respect for our employees and business partners, and making significant and positive contributions to the communities we serve.
Ellis, take some questions from our call for dissonance.
Thank you, Mr. McAfee.
Speaker Change: We will now be conducting a question and answer session. If you would like to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your telephone keypad at this time if you wish to join the queue to ask a question. Thank you very much.
Please hold a moment while we pull for questions.
Speaker Change: And the first question today is coming from Jordan Levy, from Truist Securities. Jordan, your line is live, please go ahead.
Jordan Levy: Thanks for all the details. Eric, maybe if you could just talk to your confidence levels around us.
Speaker Change: specifically the rep financing going forward given some of the pauses and reductions in government spending under this new administration.
Speaker Change: We have a high degree of confidence and reap. We've been very close to the USDA staff.
Speaker Change: and we expect approvals this month for their next phase, and then we have two right behind it. So there has been a
Speaker Change: A freezing of grants and loans that was throughout the entire government.
Speaker Change: and as they have gone through and looked at every program and then, frankly, looked at every single grant alone.
Speaker Change: We have been informed that the REAP program, the business and industry program, and the 903 program.
Speaker Change: have all been released for further transactional activity and we've received direct information that we were moving forward this month on our next $25 million re-blood.
Speaker Change: Pretty critical to getting financing on that plan and the economics more broadly, but I just wanted to get a sense of how you're thinking about How much has been spent from a CapEx perspective there thus far and then two with
Speaker Change: If we do get to kind of the end of the year or beginning of next year however long and we haven't gotten that clarification from the federal administrations, what's the plan kind of going forward as it relates to that project?
Speaker Change: Because of the way that the accounting is recognized for the capitalization, there's two different capitalization numbers. One is for project financing, and the other is that our internal accounting is very conservative, so we expense our...
Speaker Change: Investments there, largely. So the gap recognition and the project financing recognition are rather significant, significantly different. So...
Speaker Change: We do not expect that we're going to be reflecting the entire amount on our gap books of what we've invested. About $43 million of what we show in our project financing.
Speaker Change: and then our gap books are more conservative because you have to be within a certain short period of time of construction before we can start capitalizing these assets.
The 45Z, first, as Andy mentioned.
Speaker Change: California's LCFS, including jet fuel would be two significant drivers, so the inclusion of jet fuel in the LCFS would cause an increase in obligated party amounts and so
There was actually a 2% goal.
Speaker Change: Production Tax Credit to be adopted and clarified in the calculation command and treasury guidance.
Speaker Change: and we think it will take most of this year for that kind of clarification to occur. And we don't think most SAF projects are moving forward certainly at this, at the pace that we were seeing in 21, 22 and 23 as we go through this transition.
Thank you, Derrick.
Good. Thank you. Thank you.
Speaker Change: Thank you. Your next question is from Samir Joshi with H.C. Wainwright. Please proceed with your question.
Sameer Joshi: Hey, guys. Thanks for taking my questions. Do you have any insight into?
Sameer Joshi: Why the OAL asked for revisions late in the game and not earlier on? Like what was the process like and what are their concerns and it feels like there's at least going to be 120 day delay because this won't get to see what your view is.
Oh, the OAL process of the administrative legal law, administrative law.
Sameer Joshi: The LCFS is a complicated piece of legislation, and the surprise wasn't that it's complicated and needs some clarification, that was no surprise to anybody.
Sameer Joshi: The surprise is that that wasn't resolved prior to the date in which the OAL had to consent to the publishing of the amendment.
Sameer Joshi: and since that delay could take another comment period actually, I would say at this point we expect it to include another 15 to 30-day comment period. It is not something that's going to get fixed next week.
Sameer Joshi: This will probably be a couple months of internal process to get this fixed.
Sameer Joshi: Lastly, there is no end point. They could take three, four, five, six months and that's one of the things that caused the LCFS prices to go down as there is no guaranteed time period in which this gets fixed.
Sameer Joshi: That being said, we know from personal experience as a tremendous amount of staff time being invested at carb to move this along and get it done as quickly as possible.
Sameer Joshi: Did you have any other comments? No, I would just, this is Andy, I would just add to that that, um,
Sameer Joshi: I think this is an opportunity for the governor to show some leadership and stepping in. This is sort of I think an embarrassing handoff between two state agencies that should have been sort of resolved.
Sameer Joshi: before it happened. I'm being a little harsh, but the stakes are high for the stake holders and all of this.
Sameer Joshi: We're hopeful, I know in my communication with CARB, it seems that that's all the staff is working on instead of processing applications for pathways.
Sameer Joshi: So, we're hoping that the governor will step in, and the governor's office at least will step in and provide some strong leadership to get this resolved because it's...
Sameer Joshi: It's this has been going on for many years and probably is something that should have been worked out in the conference room before pick out public So our hope is is that the heat is on and they realize the stakes that are involved in getting this resolved
Are we-
Sameer Joshi: Andrew, there was some air quality permits that received late February , which you have allowed you to start the plant. But are you starting and building inventory, or are you waiting for the MCEs to renew or have a new round of cost for you?
Are you updating it or waiting?
Sameer Joshi: I'll separate that into two parts. One is our production. The second was the ONC tender process. Today news in India indicates that they will be issuing a new tender that the new tender actually was papered today, so it's in the public domain today.
Sameer Joshi: The time period for the allocation is very short. It's March 20th is the end of the tendering process.
Sameer Joshi: and their respecting shipments in April over this new tender. Regarding our production, we queued up production under the previous tender, and so we're sitting on significant amount of inventory, which will not require that we have to operate the plan or get initial shipments started.
Sameer Joshi: On the third point about local pollution control district, this has happened to us in the past. The cycle is very similar to the previous cycle and we engage with a wide variety of government.
leaders.
Sameer Joshi: in resolving their concerns about emissions. I can state that I do not believe our missions were actually what led to the shutdown notice because we had shut down our plant a month earlier.
Sameer Joshi: It was a part of resolving the issue. We've been shut down for 30 days when they gave us a notice of shut down. So it was one of those ironic government issues that we got resolved because of the OMC delivery schedule. It had virtually no impact on our production. [inaudible]
Speaker Change: Thanks for that. And just one more, I know you did touch upon it in your prepared remarks of the India IPO. Do you expect this to happen during 2025 or should we think of this as the early 2026 event?
Speaker Change: It's an IPO. So we know the market actually controls it. We expect to have our process completed so we can complete it in 2025. And as every IPO is discussed, it's always discussed subject to market conditions. [inaudible]
Speaker Change: So, we will be ready to go, we'll be then looking at the market conditions.
Speaker Change: Even in a otherwise not attracted market, we can get a very solid IPO done because of the size of this growth industry and I think that
Speaker Change: Our job is to get the paperwork done and be ready to go. And if we delay it for a quarter or two, that'll be purely because we see better market conditions ahead.
Thank you very much for taking my questions.
Andrew, thank you.
Speaker Change: Thank you. Your next question is from Derrick Whitfield from Texas Capital. Please proceed with your question.
Well, good afternoon and thanks for taking my questions.
Hey Derek, how are you doing?
Speaker Change: Good, thanks. Bigger picture. Could you speak to your expected spending plans for 2025, given the turbulence in the red by the total market in the lack of clarity and or value in 45G?
Speaker Change: We are on course with a $75 million capital budget from USDA Readable Energy
Speaker Change: We also have a variety of grants I think are told the grants are in then the $65 million dollar range.
Speaker Change: And, of course, we have ongoing industrial tax credits who have already netted about 17 million cash proceeds in January , February , February , here we expect additional cash proceeds from that.
Speaker Change: and we have some vendor support that helped us in the past. We build our pipeline with very strong financial support from a vendor. We expect to expand that vendor support, which enables us to execute quickly and then pay them off through USDA and other funds that come in, including revenues.
Speaker Change: So we are looking to continue to accelerate by our gas. We have 50 signed deris. We have 16 of them on operating or
finishing steps of operations.
Speaker Change: and so we have 34 Darries to go and we have more Darries coming on board. So we have gone to the USDA lenders as well as our vendors and laid out a plan that enables to accelerate in 2025 and 2026.
Speaker Change: and in that supporting all of our expansion plans at the curfew.
Speaker Change: Great, and then maybe shifting over to ethanol, as you think about the progression of E15 appeals across the remaining 41 states this year, what's your view on what this will do for ethanol margins for a medicine industry?
Speaker Change: I think it's going to be a slow, mega trend that when people look back on it, they'll seem as if it really happened quickly.
Speaker Change: It's going to take most of this year for the convenience source and others to finally realize, yeah, I guess we can make more money for competitive factors to kick in that the guy across the street is already doing it and his fuel is cheaper.
and I think it will see acceleration in 2026.
Speaker Change: and still have a very significant margin available. Here in California, we sell our product for about $1.80 net of discounts on the market increase in life.
and at the pump, certainly it's more than $4.
Speaker Change: So, fundamentally, our molecule goes to the blending rack and then gets struck to a gas station.
Speaker Change: and $2 a gallon times 65 million gallons is $130 million a year of margin.
Speaker Change: to the oil company for trucking our product around and dispensing it.
Speaker Change: and I think that they're definitely 50 cents a gallon of that, leaving them with over a dollar to profit on the thing. So if we get into...
Speaker Change: Strong adoption of E15 by probably 2027. I would expect we'd be above 50 cents a gallon and it would drive new investment in new capacity as we've cited.
Speaker Change: Eric Vassy, the U.S. is 18 billion gallons, two billion gallons being exported.
Speaker Change: and we're using about 14 billion gallons, little more than that domestically. So, we have a billion and a half gallons of capacity that's offline due to maintenance cycles, other things. When that gets absorbed, the only solution is, quite frankly, new capacity.
Speaker Change: And so we would exceed 20 billion gallons of demand with only even an ideal scenario, everybody running 18 billion gallons of capacity. So you're going to see new investment start to kick in driven by high margins.
Speaker Change: James Cycle, we saw in 2004, 2005, as the Renewable Field Standards adopted, should happen in 26, 27, and 28, as people realized we're short of the ethanol in the United States.
Speaker Change: Eric, one last bucket, just about a kind of a bow on carb policy. When would that likely go into effect in your opinion and will the obligations be back dated to cover 2025?
Speaker Change: I personally think we're probably two to three months away and then we have no facts to back that up at all.
Speaker Change: It's the case of the internal CARB staff and the internal OAL staff, and frankly, as Andy mentioned, it's the amount of encouragement offered by Governor Newsom for them to work extra hours to get this done. We do know that CARB is working very, very hard on this. We just have no idea about how long that's going to happen, but I think with the political T-Leaves here.
It's going to be sooner rather than later.
Thanks, Eric.
Thank you.
Speaker Change: Thank you. Your next question is coming from Matthew Blair with TPH. Please proceed with your question.
Speaker Change: Thank you and good morning. Eric, could you provide any more color on what drove the negative you bit of results in the fourth quarter? Was that mostly due to ethanol?
Speaker Change: Could you also talk about ethanol fundamentals in the first quarter? We're seeing pretty high utilization, very high inventories. Do you think ethanol is on track for an even weaker D1 than it was in Q4? Thank you.
Q4 was oversupply, and I- [inaudible]
Speaker Change: The corn prices, as you know, have moved both up and as well as down the first quarter, but they had some downward moves as well. So I think our performance at first quarter will probably prove to be a little better than fourth quarter.
Speaker Change: We did make note that it's the operational changes that I think led to the improvement. I don't think it was a market. We slowed down our grind, and I think what we're seeing certainly from yesterday's EIA numbers is that others are responding some remotely. There was, you know, EIA numbers yesterday were the first time we've seen this year that we're relatively positive.
Speaker Change: and the folks that we work with from a marketing perspective are sort of seeing light at the end of the tunnel as we get, as we get through this period. The other thing I think that influenced some of the...
Speaker Change: You know, the price of gas while not historically high from a use perspective I just saw a chart that show that this is the strongest demand for gas, maybe an on record. [inaudible]
Speaker Change: So, after gas pricing went up a little bit, obviously corn price went up a little bit, or a lot.
Speaker Change: But we've adjusted our grind as have I think other Midwestern plants in April you'll start to see some of those plants go into their annual turnaround which will help us get rid of some of this inventory.
Speaker Change: So we're kind of feeling like hopefully there's there's some light here at the end of the tunnel as we as we head into Q2.
Speaker Change: Sounds good. And then could you share any expectations on the D3RBO?
Speaker Change: Going forward, you know, last time around we had a three year RVO, I think the average increase was about 30% a year.
in the blending obligation. Do you have any expectations?
Speaker Change: on just what that might look like. Should we expect a new two or three-year RBO this spring, and how much would the blending obligations go up by?
Speaker Change: Two items on that one was historical back in the 2024 DPA a couple days ago, so they had extended the compliance period because they were intending to adopt the new lower number of D3 Rinsman Day for 2024.
in 2024. And actually, I'd say this.
Speaker Change: It's a very indirect way of saying, oh, by the way, guys, you're never you're never going to be short because this is after year was done all the investments have made all the products been shipped and then they changed the role for the game which was that the obligated parties didn't have to worry about being short if that becomes the pattern. [inaudible]
Then it won't matter what the RBO is.
Speaker Change: I'm just me and Frank with you, might as well just skip the RVO, let the oil companies buy whatever they want in the end of the year, just set the RVO to whatever the oil companies actually did. Now, why do I say that? Because that's what they did with ethanol for eight years.
Speaker Change: Starting in 2014, they just didn't issue an RVO, and then you later had a couple of federal court cases lost by the EPA, they were in violation of federal law, and they set the RVO at whatever was actually consumed.
Speaker Change: It's not a great commentary on the management of the...
Speaker Change: Program by the EPA, but let's just face the facts that that's what's going on. The price of the credits was approximately $3.50 prior to this proposal but EPA to remove excess requirements.
for D3 Rins and has settled around 245.
Speaker Change: After this news has hit the market, there's some reasons why that is the case. And my personal view is we're probably at 245 until the president decides he wants more investment in domestic renewable energy driven by waste.
Speaker Change: And when he decides that, then I think we'll be at four or even higher because the entire system is structured to attract new investment. And when you destroy excess demand, then nobody should make new investment.
Speaker Change: and that's what the signal is on the EPA is, don't go put more investment into D3-Rincreation because there's no market for the product.
Speaker Change: We're exchanging a little about the behavior of the last administration on this particular topic.
Speaker Change: I'm not surprised at all of the current administration, but there is going to be some backlash in which people point out.
Speaker Change: that if the market's not growing, then farmers aren't getting any additional revenue, and there's no new investment, no new job creation and domestic energy, and that violates the unleashing American energy executive order, so I think we're all kind of watching the new administration. Thank you very much.
Speaker Change: See where the priorities are, and I think eventually the teacher, Ren, RVO, will come back into being relevant to new investment growth. The question is whether it's going to be this year or next year.
Great. Thanks for your comments.
Derrick. They gave Matthew nothing.
Speaker Change: Thank you. Your next question is coming from Dave Storms from Stonegate. Please proceed with your question.
Dave Storms: Good morning, and thank you for taking my questions. My first one I want to start with a modeling question, with seven digesters on the cusp of carbopruple, can you break out maybe the MMV2 contribution from those digesters? Is it as easy as being roughly 45% of your yearly MMV2 user? Is there another way we should think about this?
Speaker Change: It's approximately 350,000 per year. It's about 25,000 average per dairy for a modeling perspective. We do have larger and we have smaller dairies and we have some digesters actually have multiple dairies feeding them, but from the perspective of modeling 25,000 in a BQ per dairy is probably a decent number to use currently. [inaudible]
Speaker Change: So that's very helpful. Thank you. And then just wanted to ask about the market for the sale of investment tax credits. How has that changed over the last year? Looks like you know from the quarter lag and a 10% discount when you go to sell those credits? Is that market anticipated to maybe have condensed spreads over 20, 25 or anything else that you're expecting that that market?
Speaker Change: I think the market is settled on a bid-ass spread that, as you've seen in now, are multiple transactions closed.
Speaker Change: for total about 70 million of net proceeds. It's about a 15% total discount between the discount, the lawyers, the insurance policy, the brokers, everybody in the whole process ends up being a little bit less than 15% discount.
Speaker Change: Anderson, thank you for taking my questions. Good luck with Q1.
Yeah, thank you, Dave.
Speaker Change: Thank you. Your next question is from Ed Woo from Ascendient Capital. Please proceed with your question.
Ed Wu: Yeah, thank you for taking my question. You know, the India IPO, have you talked further about what you may possibly do with the proceeds, either invest it in India or bring it back to the US?
Ed Wu: The India I feel process has a very disciplined use of funds component that is not the way it works in the United States.
So, we are being ...
Ed Wu: What's called diligent about disclosing our use of funds until we get through the India IPO process?
Ed Wu: But you will see in other IPOs in India funds that are repaying debt from offshore investors or even private equity firms that are getting funds from their IPO.
Ed Wu: The actual calculation is actually a part of sizing the IPO and even looking at marked acceptance of the IPO will determine.
Ed Wu: the amount of funds that could be repaid to the parent company for a funds that were invested in the subsidiary. So it's going to be a while before we'll come up with a number that's definitive.
Speaker Change: Great. And previously, you know, you just told that India was pretty much self-sufficient. Is that still the case? And you think it will be that way until the after-die-po completed?
Speaker Change: It is still the case, and we do have a lot of investment in this inventory and operations
Speaker Change: So, beginning shipments to O'MC's will free up liquidity in India, but it is...
Speaker Change: has no long-term debt. It's investing in inventory to be well-positioned for timely delivery and that's been our highest priority and the good news is the India team is well-positioned to do that again on multiple of the contracts that we expect to see this year.
Speaker Change: Great. Well, thank you, and I wish you guys good luck.
Thank you, Ed. Appreciate it.
There are no further questions at this time.
Speaker Change: I would like to turn before back to management for closing comments.
Speaker Change: Thank you to Ametis stockholders, analysts, and others for joining us today. We look forward to talking with you about participating in the growth opportunities at Ametis.
Speaker Change: Thank you for attending today's Aemetis earnings conference call. Please visit the investor's section of the Aemetis website where we'll post a written version and an audio version of this Aemetis earnings review and business update. Tom?
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.